Cisco stock soars 8 % after analyst report

CHICAGO: Shares of New Economy bellwether Cisco Systems Inc. surged more than

8 per cent on Wednesday in heavy trading after an influential analyst said the

large corporation networking market in North America, a big segment for the

world No. 1 networking firm, was stabilizing.

Cisco shares jumped $1.47 to $19.27, a rise of 8.26 per cent, in mid-morning

trade on the Nasdaq. Volume was 84 million shares. Earlier in the session,

shares of the San Jose, California-based Cisco soared more than 11 per cent to

$19.85. Over the past year, Cisco has underperformed the Nasdaq 100 Index by

more than 45 per cent.

Morgan Stanley analyst Christopher Stix said there are indications the large

corporation, or enterprise, networking market in North America is stabilizing.

Other networking companies, including Juniper Networks , Redback Networks Inc. ,

Sycamore Networks Inc. and Extreme Networks Inc. , also saw their stocks rise on

Wednesday.

Even though Stix's comments on Cisco were mixed, one analyst said the tech

sector has been so depressed in the past year that investors gleefully embrace

any rays of light. "Any sign that there is improvement, the stocks are

doing better, causes great glee and a movement of momentum money into the

sector," said senior portfolio manager with mutual fund company Dreyfus

Corp, Tim Ghriskey.

Stix, however, retained a neutral rating on networking giant Cisco's stock,

adding he could not justify its valuation at higher prices despite the

improvement in the North American enterprise networking market, which represents

about one-third of Cisco's revenues.

"We continue to stay on the sideline on Cisco due to valuation," he

said in a research report, which carries the headline, "Still too rich for

our blood." "We do not enjoy continually playing the role of wet

blanket on Cisco, but if there is one thing we have learned from the recent

pullback in this industry it is that regardless of momentum, valuation is

paramount in the end," Stix added.

Cisco officials said they have a policy of not commenting on share movements.

The North American enterprise networking spending may still be weaker than last

year, but it seems to have stabilized on the margin, Stix said. Recent interest

rate cuts by the US Federal Reserve are finally having an impact on investor

confidence in the economy, which could eventually lead to a boost in

information-technology infrastructure spending, he added.

However, Stix sees the service provider networking equipment business as

still difficult and the international enterprise business, especially in Europe,

showing signs of weakness.

(C) Reuters Limited 2001.